A VSLA is a self-selected group of people living in the same village, who pool their money into a fund from which members can borrow. The money is paid back with interest, causing the fund to grow. It is a time-bound accumulating savings and credit association (ASCA) in which 15 to 30 people save regularly-weekly and borrow from the group fund. Loans usually have terms of between one and three months and are repaid with interest. On a date chosen by the members at the outset, usually after about a year, all the funds are divided among the members in proportion to each one's savings (shares). This process is called the ‘action audit’ and produces pay-outs for members. The groups normally re-form immediately and start a new cycle of savings and lending.

 

Members of VSLAs receive a return on their savings investments that go from as low as 30% per annum, to a high in excess of 100% - far more than is paid by any commercial bank anywhere in the world. They are able to save when they need and in whatever amount they wish following their by-laws. They are able to borrow with a minimum of fuss, with loans and insurance benefits approved by their peers, and can obtain loans that range from small change to several hundred shillings. Members are also able to receive insurance services by contributing a weekly uniform saving called welfare fund to mitigate the effects of unforeseen disasters, and can set-up funds for school fees, festivals and other predictable annual events.

 

VS&L is a methodology that is designed for the poor and the very poor and enables them to manage their household cash flow more efficiently and flexibly and to invest in income generating activities that secure and stabilize cash income. VSL’s most dramatic impact is on self-respect and social capital, particularly amongst women.